North Carolina Mut. Life Ins. Co. v. Terrell

• Decision Date: 05 October 1933
• Docket Number: 6 Div. 354.
• Citation: 150 So. 318,227 Ala. 410
• Parties: NORTH CAROLINA MUT. LIFE INS. CO. v. TERRELL.
• Court: Alabama Supreme Court

150 So. 318

227 Ala. 410

NORTH CAROLINA MUT. LIFE INS. CO. v. TERRELL.

6 Div. 354.

Supreme Court of Alabama

October 5, 1933

Rehearing Denied Nov. 2, 1933.

Appeal from Circuit Court, Jefferson County; J. Russell McElroy Judge.

Action on a policy of life insurance by Mabel C. Terrell against the North Carolina Mutual Life Insurance Company. From a judgment for plaintiff, defendant appeals.

Affirmed.

Supreme Court could not consider whether insurer was entitled to deduct unpaid premiums from life policy, where question was not presented to trial court.

On November 14, 1925, defendant executed and delivered to Hazy C. Terrell a policy of life insurance, in the amount of $1,000, payable to his wife, the plaintiff, as beneficiary in consideration of a semi-annual premium of $20.99, payable in advance, for twenty full years.

Pertinent provisions of the policy are as follows:

"North Carolina Mutual Life Insurance Company * * * by this contract of insurance agrees to pay $1,000.00, less any indebtedness to the Company and any unpaid portion of the premium for the then current policy year * * * to the beneficiary (plaintiff) of the insured, upon the surrender of this policy properly receipted immediately on receipt of due proofs of the death during the continuance of this contract of * * * the insured. * * *

"Payment of Premiums. Except as herein provided the payment of a premium or installment thereof shall not maintain the policy in force beyond the date when the next premium or installment thereof is payable.

"Grace Period. A grace of one month (but not less than thirty days) shall be granted for the payment of every premium after the first, during which time the insurance shall continue in force. If death occur within the grace period, the unpaid premium shall be deduced from the amount payable hereunder.

"Reinstatement. This policy may be reinstated at any time within five years from the date of default in the payment of any premium, upon evidence of insurability satisfactory to the Company and upon the payment of arrears of premiums and any other indebtedness with interest thereon at the rate of six per centum per annum. * * *

"Non-Forfeiture Provisions

"After three full annual premiums shall have been paid the Insured may within three months after default in the payment of any premiums surrender this policy and have the choice of the following options:

"(1) Receive its cash surrender value, less any indebtedness to the Company hereon. The cash surrender value shall be the reserve on this Policy at the date of default, plus the reserve on any paid-up additions thereto and any dividends standing to the credit of this policy, less a surrender charge for the first twenty years, which in no case shall be more than two and one-half per cent of the sum insured; or

"(2) Receive paid-up insurance as is provided below, payable at the same time and on the same conditions as this Policy. If no other option is selected this Policy will be continued in force under this option without any action on the part of the Insured; or

"(3) Receive extended insurance for an amount equal to the face of this Policy, provided there is no indebtedness to the Company hereon, and for such term in years and months from the date of default as is provided below, but without the right to loans and cash surrender values.

"The payment of the cash surrender value may be deferred for a period of not exceeding ninety days.

"The amount of paid-up insurance or the term for which the insurance will be extended shall be such as the cash surrender value, provided there is no indebtedness to the Company hereon, will purchase as a net single premium at the attained age of the Insured at the date of default, according to the American Experience Table of Mortality, and interest at the rate of three and one-half per cent per annum.

"Any indebtedness to the Company under this Policy will be deducted from the cash value; and such indebtedness will also reduce the amount of paid-up insurance or the amount continued as term insurance in such proportion as the indebtedness bears to the cash value at due date of premium in default. * * *"

The insured paid the initial semiannual premium, and continued thereafter to make payment as required by the policy up, through, and including the premium due May 14, 1931. He did not on November 14, 1931, or within the grace period, make payment of the semiannual premium which became due November 14, 1931. On December 30, 1931, insured signed an application for reinstatement of the policy, and a 90-day note in the sum of $15 payable to the insurer. On said date insured delivered the application for reinstatement, the note, and the sum of $6.22 in cash to the district office of insurer at Birmingham. On January 2, 1932, the district office forwarded the same to the home office of the insurer, and they were received at the home office January 4, 1932.

On January 3, 1932, insured died. The insurer did not accept the application for reinstatement, and there was no reinstatement of the policy.

The beneficiary, plaintiff, made proof of death on forms furnished by the insurer, which were received at the home office January 13, 1932.

On January 20, 1932, defendant tendered to plaintiff the sum of $270 (paid-up insurance) in discharge of defendant's liability under the policy, and at the same time tendered the mentioned note for $15 and $6.22 in cash, theretofore paid by insured in an attempt to reinstate the policy. Plaintiff refused to accept the tender.

At the time of insured's death he had made none of the elections specified in the policy under the head of "Non-Forfeiture Provisions," that is, the options with reference to cash surrender value, paid-up insurance, and extended insurance.

Plaintiff, since the death of insured, consistently and continuously claimed that she was entitled to the face of the policy, with interest, and defendant consistently and continuously claimed its legal liability for only the sum of $270 as arrived at and determined by the provisions of the policy.

The trial court rendered judgment for plaintiff in the sum of $1,000, with interest from January 13, 1932, to March 1, 1933, the date of the judgment.

Defendant appeals.

Huey, Welch & Stone, of Bessemer, for appellant.

A. Leo Oberdorfer, of Birmingham, for appellee.

GARDNER Justice.

The suit is upon a life insurance policy, dated November 14, 1925, payable to plaintiff as the named beneficiary.

The cause was tried on an agreed statement of facts, the salient features of which appear in the report of the case.

The policy had been in force for more than six years when the insured died, on January 3, 1932, but there was default on the premium due November 14, 1931. Under the "non-forfeiture provisions" of the policy insured had the right (three full annual premiums having been paid) within three months after default in payment of any premium to exercise certain options therein provided. But he died within this three-month period without having made any election as to such options, and defendant insists the only sum due under the policy is $270 paid-up insurance, which sum was duly tendered.

In support of this insistence defendant assumes that at the expiration of the thirty days of grace following the default in payment of the premium due November 14, 1931, the policy by its terms lapsed and all rights thereunder forfeited except as to the paid-up insurance which automatically came into operation and effect, citing, among other authorities, McDonald v. Columbian Nat. L. Ins. Co., 253 Pa. 239, 97 A. 1086, L. R. A. 1916F, 1244; Mich. Mut. Life Ins. Co. v. Mayfield's Adm'r, 121 Ky. 839, 90 S.W. 607; Balthaser v. Ill. Life Ins. Co. (Ky.) 110 S.W. 258; Sugg v. Equitable Life Assur. Society, 116 Tenn. 658, 94 S.W. 936; Blake v. Nat. Life Ins. Co., 123 Cal. 470, 56 P. 101; Provident Life & Accident Ins. Co. v. Hollums, 213 Ala. 300, 104 So. 522; 2 Couch on Ins. § 344; 37 Corpus Juris, 511.

The authorities noted have been carefully examined. They deal with policy provisions widely different from those in the policy here considered. As observed by the court in Veal v. Security Mut. Life Ins. Co., 6...